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Insurance and Expanding Systemic Risks

image of Insurance and Expanding Systemic Risks

This comprehensive study responds to the growing concerns of economic, financial, political and social actors regarding the ever increasing exposure to new expanding risks. These risks are particularly related to natural disaster/environment pollution, technology, health and terrorism. For insurers the difficulty is encountered in adequately appraising and covering the potential liability stemming from these risks. It also sketches out some policy recommendations for decision makers in governments and in the business community on how to limit, prevent and manage such risks. In this perspective it will constitute a unique reference work for the attention of both OECD countries and emerging economies.

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Alternative Compensation Mechanisms and New Financing Techniques

In this study, we have so far mainly discussed the applicability of traditional insurance schemes as an instrument to compensate damage caused by systemic risks. Moreover, we focused principally on liability insurance. In this section, we will show that the general principles of insurance, which were discussed above, are also relevant even when traditional insurance undertakings are unable to provide cover in the form of liability insurance, and other compensation mechanisms will be outlined. For instance, the general idea that, no matter what type of compensation system is put in place, it should always be organised in such a manner that the party creating the risk should also bear the financial consequences of it insofar as possible, is a principle which is not only crucial for liability insurance. This idea of risk differentiation and the fact that a liability system should provide adequate incentives for prevention remains valid no matter what type of compensation mechanism one seeks...

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